Investment banking giant Goldman Sachs advised clients to grab the precious metal, seen as a bulwark against rising prices, while fund managers said investors needed a “policy insurance ”for their portfolios.
Inflation hit a 13-year high in America, the US Department of Labor reported last week, soaring to 5.4% in June and shocking economists who expected the pace of price increases to rise. slow down. In Britain, the measure of consumer price index inflation reached 2.5% in June, exceeding the Bank of England’s 2% target.
Gold is trading at around $ 1,800 (£ 1,300) an ounce, but Goldman Sachs’ Mikhail Sprogis said it should be worth at least $ 2,000 today – and more if central banks such as the US Federal Reserve was not responding to a continued rise in inflation.
“It has the potential to recover significantly in the event that the global recovery is hampered or inflation picks up sharply and the Fed responds underestimated,” he said. “In this scenario, gold prices should benefit the same way they did during previous periods of excessive inflation. “
Gold is considered a store of value when inflation rises, unlike currencies which lose value in real terms. John Chatfeild-Roberts of Jupiter, the investment firm, said: “If there is sustained inflation, gold will retain its value.
“But gold has performed well over the past 20 years, even in the absence of inflation. It also increases when other investments go down – which is why owning it is always important to protect a portfolio.
Despite rising inflation this year, gold has so far performed poorly in 2021. It has lost 3.5% in value while UK and global stock markets have delivered double-digit returns.
However, Catherine Doyle of Newton Investment Management said it should always be a central part of investors’ portfolios. “It is a currency that cannot be manipulated by central banks, with limited supply and good inflation hedging properties,” she said.